Clarity and Predictability at the SEC: Abacus, Citigroup, and the Political Economy of Securities Fraud Settlements
Scott Bell, Clarity and Predictability at the SEC: Abacus, Citigroup, and the Political Economy of Securities Fraud Settlements, 2012 Colum. Bus. L. Rev. 865.
The United States Securities and Exchange Commission (“SEC”) recently brought several enforcement actions against large investment banks for transactions involving collateralized debt obligations (“CDOs”)—transactions that collectively cost their investors billions of dollars in losses. In three actions involving separate banks, the SEC reached widely different results, despite alleging similar transaction structures in each case. One commentator suggested that Citigroup benefited from a “late-mover” advantage in its dealings with the SEC. This allowed the bank to reach a favorable settlement compared to the settlement achieved by Goldman Sachs.
This Note examines the salient details of each of the three transactions and settlements: Goldman Sachs’ ABACUS 2007-AC1, LTD; J.P. Morgan’s Squared CDO 2007-1, Ltd.; and Citigroup’s CLASS V Funding III, LTD. It then evaluates how the nine factors the SEC uses to guide its settlement decisions appear to have been applied inconsistently across transactions. Concluding that the nine factors do not adequately explain discrepancies in the settlement results, this Note argues that other differences, such as the timing of the suits, growing uncertainty regarding the applicability of legal standards to the available facts, and the varying public perception of each bank in question, provide more insight into the results of the SEC’s enforcement actions.
Volume 2015 | Issue 2
A selection from our current issue.
- The Data Security Governance Conundrum: Practical Solutions and Best Practices for the Boardroom and the C-Suite
by Thad A. Davis, Michael Li-Ming Wong & Nicola M. Paterson
- Law in Regression? Impacts of Quantitative Research on Law and Regulation
by David C. Donald
- Preparing Financial Regulation for the Second Machine Age: The Need for Oversight of Digital Intermediaries in the Futures Markets
by Gregory Scopino
- Congress Killed the Radio Star: Revisiting the Terrestrial Radio Sound Recording Exemption in 2015
by Melanie Jolson
- A Safe Harbor from Spoliation Sanctions: Can an Amended Federal Rule of Civil Procedure 37(e) Protect Producing Parties?
by Alexander Nourse Gross
- Death and Live Feeds: Privacy Protection in Fiduciary Access to Digital Assets
by Jeehyeon (Jenny) Lee